Quebec’s Caisse de dépôt et placement announces new initiatives in its climate strategy

On September 28, 2021, the Quebec pension fund Caisse de dépôt et placement du Québec announced two new initiatives as part of its climate strategy: divestment from oil producing investments and creation of a transition envelope.

The Caisse has $390 billion of holdings, and is Canada’s second largest pension fund.

What do the two new initiatives mean?

The Caisse is divesting (i.e., selling off) its remaining oil-producing investments of $4 billion by the end of 2022. By doing so, the Caisse decided to exit the oil production market, rather than retaining the investments and trying to influence oil companies to reduce emissions.

It is also setting up a $10-billion transition envelope to decarbonize the high emitting industrial sector, such as the steel industry. To ensure credibility, these investments must abide by specific criteria, including adoption of worldwide standards and clear progress on decarbonization.

Both initiatives are part of the Caisse climate strategy to reach net zero investment portfolio by 2050.

Why is this significant?

The Caisse decision to reduce its holdings in the oil industry to combat climate change is not isolated among investors. In September 2021, the Ontario Teachers’ Pension Plan Board announced 2025 and 2030 emission reduction targets for its portfolio holdings, as part of its goal to reach net zero by 2050. Also in September 2021, Harvard University announced it does not plan to make any future investments in fossil fuels in its $42 billion endowment fund, and is winding down its legacy investments. In a message to the Harvard community announcing this decision, the university’s president noted “climate change is the most consequential threat facing humanity”.

What is the reaction from the Canadian oil industry?

In a statement issued shortly after the Caisse announcement, the Canadian Association of Petroleum Producers (CAPP) noted world wide oil and gas demand today is “rapidly rising and is expected to reach record levels within the next year and stay there for decades to come”. CAPP stated the Caisse decision will not impact the demand for oil and gas. It only drives investment away from Canada, a responsible oil and gas producing country, to countries that do not have Canada’s environmental or human rights standards. Investment in the Canadian oil and gas industry should instead be viewed as responsible and sustainable.

Is this a sign of things to come?

The financial sector is increasingly aware of the importance of socially responsible investing (SRI). A result has been divestment from oil and gas holdings by some large investors, such as pension funds and university endowments, due partly to pressure from their stakeholders. This trend will likely continue as the public is increasingly aware of the urgent need to act to reduce greenhouse gas emissions to limit global warming and its impacts.